If Nifty holds above 15,200, it may hit 15,500, Bank Nifty positive in short-term; SBI, HDFC in focus

May 24, 2021 8:49 AM

Nifty continues to remain in an uptrend in the medium term, so buying on dips continues to be our preferred strategy

Nifty, SBI, RIL, Cipla, Bank nity, stock marketsThe chart pattern suggests that if Bank Nifty crosses and sustains above 35500 level it would witness buying which would lead the index towards 36500-36800 levels.

By Rajesh Palviya

Nifty closed at 15175 with a gain of 498 points on a weekly basis. On the weekly chart the index has formed a long bullish candle forming higher High-low compared to previous week and has closed above previous week’s high indicating positive bias. The index is moving in a Higher Top and Higher Bottom formation on the weekly chart indicating positive bias. The chart pattern suggests that if Nifty crosses and sustains above 15200 level it would witness buying which would lead the index towards 15350-15500 levels. Important Support for the week is around 14850-14700. Nifty is now well placed above its 100 SMA indicating positive bias in the short term. Nifty continues to remain in an uptrend in the medium term, so buying on dips continues to be our preferred strategy. For the week, we expect Nifty to trade in the range of 15500-14850 with a positive bias.

The weekly strength indicator RSI and momentum oscillator Stochastic have both turned positive and are above their respective reference lines indicating positive bias.

Nifty derivative outlook

Nifty futures witnessed decrease of open interest by -11.35% shedding of 12.72Lac shares with a price gains of 3.34% indicating Short Covering. The sentiment indicator PC Ratio is currently trading at 1.38, increasing from 1.11 of last week indicating a positive bias in the market with caution at higher levels. In Nifty the high OI on the CALL side in the monthly expiry scheduled 27th May is at 15,200, 15,500 & 15,700 strike, with 15,500 & 15,700 acting as a strong resistance wherein there has been writing of 11.53Lac shares & 14.74 Lac shares respectively. The high OI on the PUT side is at 15,000 -14,800 & 14,500 strike, with 15,000 acting as a strong support as there has been of writing of 17.96Lac. Fiis compared to last week have increased their Future Index Long position by 27,453 contracts & have decreased their Future Index Short by 18,056 contracts.The tentative range for the current week is likely to be between 14,800 to 15,500.

Bank Nifty outlook

Bank Nifty started the week on flat note and buying momentum for most part of the week led it to close on a strong note. Bank Nifty closed at 34607 with a gain of 2437 points on a weekly basis.

On the weekly chart the index has formed a long Bullish candle forming higher High-low compared to previous week and has closed above previous week’s high indicating positive bias. The index is moving in a Higher Top and Higher Bottom formation on the daily chart indicating sustained up trend on long term charts. The chart pattern suggests that if Bank Nifty crosses and sustains above 34800 level it would witness buying which would lead the index towards 35300-35800 levels. However if index breaks below 34000 level it would witness selling which would take the index towards 33600-33200. Bank Nifty is trading above 20, 50 and 100 day SMA’s which is important short term moving average, indicating positive bias in the short term. Bank Nifty continues to remain in an uptrend in the medium term, so buying on dips continues to be our preferred strategy. For the week, we expect Bank Nifty to trade in the range of 36000-33500 with mixed bias.

The weekly strength indicator RSI and momentum oscillator Stochastic have both turned positive and are above their respective reference lines indicating positive bias.

Bank Nifty derivative outlook

Bank Nifty futures witnessed increase in open interest by 13.35% by adding 1.99 Lac shares with price gains of 7.74% indicating Long Build Up. In BankNifty the highest OI on the CALL side in the monthly expiry is at 35,000 -35,500 & 36,000 strike, with 35,000 & 36,000 acting as a strong resistance zone wherein there has been writing of 5.87Lac & 4.52Lac shares respectively, while on the PUT side highest OI is at 34,000 – 33,500 & 33,000 strike, with 34,000 & 33,500 acting as a strong support level as there has been writing of 6.52Lac & 3.59Lac shares in OI respectively. IndiaVix is currently at 19.08 % and has been on a downward trajectory after making a recent high of 21.15% suggesting confidence and stability in current market trend and further descend from these levels will further augment for more uptrend in the market.

Sectors and stocks in focus this week

We expect Banking, IT, Pharma, Healthcare, FMCG and Oil & Gas sectors to do well in the near term. One can focus on stocks like State Bank of India (SBI), Housing Development Finance Corporation (HDFC Ltd), Larsen & Toubro, Cipla, Pidilite Industries, Wipro, Motherson Sumi for near term bullish trend.

(Rajesh Palviya is Vice President– Research (Head Technical & Derivatives) at Axis Securities Limited. The views expressed are the author’s own. Please consult your financial advisor before investing.)

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